Understanding the UK's Updated Audit Thresholds: What Businesses Need to Know

Feb 53 min read

In a significant move aimed at reducing the administrative burden on businesses, the UK has increased its Company and group size thresholds.

These changes will affect companies whose financial period begins on or after 6 April 2025, impacting micro-entities, small companies, and medium-sized companies.

Here’s a breakdown of what this means for businesses across the UK.

Understanding the UK's Updated Audit Thresholds: What Businesses Need to Know

New Thresholds

Company and group size thresholds (net) for financial years commencing on or after 6 April 2025
*2 out of 3 of:*	Micro	Small	Medium	Large
Annual turnover (£)	<1m	<15m	<54m	>54m
Balance sheet total (£)	<500k	<7.5m	<27m	>27m
Average number of employees	<10	<50	<250	>250
Group size thresholds (gross) for financial years commencing on or after 6 April 2025
*2 out of 3 of:*	Not applicable	Small	Medium	Large
Annual turnover (£)	<18m	<64m	>64m
Balance sheet total (£)	<9m	<32m	>32m
Average number of employees	<50	<250	>250

These changes are poised to significantly reduce the number of companies that need to undergo statutory audits. However, businesses should be mindful of several key considerations as they navigate this new landscape.

Key Considerations for Businesses

Internal Controls

While the removal of a statutory audit requirement can reduce costs, companies must ensure they have robust internal controls in place. Strong internal processes are essential to mitigate financial risks and maintain accurate financial reporting.

Growth Planning

As businesses grow, they may eventually exceed the new thresholds and be required to undergo statutory audits. It is crucial for companies to plan for this transition, ensuring they are prepared for the increased scrutiny that comes with a statutory audit.

Business Sale

For businesses contemplating a sale, independent auditors might still be necessary to reassure potential buyers about the company's financial health. Even if exempt from statutory audits, having an independent review can add credibility and value during a sale process.

Other Mandatory Statutory Requirements

Exemption from audits does not mean exemption from all statutory obligations. Companies must remain vigilant about adhering to other mandatory statutory requirements to avoid potential legal issues.

Long-term Financial Health

Finally, maintaining a voluntary audit can be a strategic decision that supports a company's long-term financial health. Voluntary audits can enhance stakeholder confidence, facilitate business growth, and provide valuable insights into financial management practices.

In summary, while the increased audit thresholds offer relief to many companies, it is vital for businesses to carefully evaluate their internal processes, growth strategies, and statutory obligations. By doing so, they can continue to thrive and maintain financial integrity in this evolving regulatory landscape.

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